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New Zealand and Indonesia have taken an important step forward, Prime Minister John Key says, after the two countries agreed to put a multi-million-dollar export dispute behind them and to boost trade in a range of areas.

Among the new commitments made by the countries in bilateral talks yesterday(MON) at the Presidential Palace in Jakarta were plans to export cattle to Indonesia for breeding and to help develop the South East-Asian country's dairy industry.

New agreements were also signed for New Zealand and Indonesia to work together on renewable energy, tourism, and e-commerce. The commitments are part of a plan to double trade between the countries to $4b by 2025.

"I'm quietly quite confident that things have taken an important step forward," Key told reporters after the talks.

"It was a really good meeting. It probably exceeded what I thought it would."

At a press conference at the palace, Indonesian President Joko Widodo described the meeting as "productive and friendly".

New Zealand has sought to take advantage of the economic opportunities created by Indonesia's growing middle class, but has recently been frustrated by export restrictions which have seen beef exports plummet over the last six years.

It laid a complaint against Indonesia with the World Trade Organisation, but Key said yesterday a ruling may no longer be required.

"I feel a lot more confident that I did 24 hours ago that we will have a resolution on that issue."

The parties would prefer to resolve the matter before the WTO ruled on the case, he said.

New Zealand has also been invited to invest in a cattle breeding programme in Indonesia, which under Widodo is aiming to become more self-sufficient in providing for its 255 million people.

The issue of live exports has been controversial in New Zealand, because of past cases in which large numbers of sheep died while being transported. Export for slaughter is now banned, and the cattle sent to Indonesia would only be used for breeding purposes.

All exports would have to meet animal husbandry and health conditions, Key said.

Widodo also spoke about Indonesia becoming a "milk hub" of South-East Asia, with assistance from New Zealand. Key said this would not undercut New Zealand's dairy sector, because its high-quality products would remain in demand.

"I don't think that in any way threatens New Zealand."

Despite their differences, Key - a former investment banker - and President Joko Widodo - a former furniture store owner - appeared to hit it off, joking and smiling through their photo appearances yesterday. Widodo had shown great warmth towards New Zealand, Key said.

Outside the palace, large images of Key and wife Bronagh's faces were placed on billboards alongside pictures of Widodo and his wife Iriana.

Key's motorcade was met by schoolboys and schoolgirls all in white and waving New Zealand flags. After a military parade, a brass band played the national anthems and a 19-gun salute boomed across the palace's sprawling gardens.

More than trade

In his formal statement after the bilateral meeting, Key said New Zealand and Indonesia's relationship went "much further than just one of economics".

"We had a good and open discussion about human rights," he said.

Human rights advocates had urged Key to demand change in the West Papua region, where an ethnically distinct population has long suffered abuse and been detained in large numbers. The Green Party said the Government had been too soft on the issue out of the fear that it would undermine its trade negotiations.

Speaking to reporters, Key said Indonesia had raised the Papua issue proactively. New Zealand was told that any alleged human rights breaches were investigated, he said.

"I think we have actually made genuine progress.

"They were quite careful to say that if there is an issue, then the issue gets investigated and resolved."

There was less progress on the issue of the death penalty, which Key said Indonesia was defending staunchly. Widodo came into power as a reformist, but has reinstated executions as part of a bid to tackle what he sees as a drug addiction crisis around the country. Another round of executions, the first since last April, is due to take place soon.

"It's not a position that I think the Indonesians are going to change their position on anytime soon," Key said. The Indonesian Government was grappling with a serious drug problem, and Widodo wanted to send a strong message.

"We in New Zealand believe that it can be sent a different way.

"But as you've seen in the past I don't think that's likely to change in a hurry."

Prime Minister John Key and Indonesian President John Key at the Presidential Palace in Jakarta. Photo / Isaac Davison

Prime Minister John Key and Indonesian President John Key at the Presidential Palace in Jakarta. Photo / Isaac Davison

Tourism boom

The New Zealand Government's eagerness to impress was evident in several events held around Jakarta earlier in the day. New Zealand Trade and Enterprise hosted a tourism-themed reception for businesspeople and investors in a glitzy ballroom the size of a football field in the Shangri-La hotel in central Jakarta.

A new "100% Pure" advertising campaign, which features film director James Cameron, played on a screen 30 metres wide as attendees ate New Zealand rack of lamb and drank Central Otago Pinot Noir.

At present, around 17,000 Indonesians traveled to New Zealand a year.

"Obviously we'd like to see that number rise," Key told the audience of around 500 people.

He spoke of the growth in Chinese visitors as the country's middle class grew - a transformation which is also taking place in Indonesia. Around 500,000 Chinese are expected to come to New Zealand next year, and will spend as much as 1.5 million Australian tourists.

New schools

Earlier, Key announced a new aid package for Indonesia's schooling system.

New Zealand give more aid - around $90 million a year - to Indonesia than any other country outside the Pacific.

A $4.8 million aid package would improve access and quality of early childhood education for around 7400 Indonesian children. Another $2.3 million would go towards new short-term training scholarships, English-language training awards, and more post-graduate scholarships.